Portal Madness

by Forest Linton

What is a portal?
A portal is a site that brings together a variety of content and services in one area with the idea of becoming the single best starting place for as many users as possible. Once a portal site has attracted zillions of eyeballs it can leverage them into more ad sales, higher ad rates and special sponsorship and promotional opportunities. Yahoo was one of the web pioneers who defined the portal market (before they were called portals) and AOL did the same with its online service before bringing a lot of its content to the Web. In addition to the major search engines, many of the high traffic sites on the Web are currently re-defining themselves as portal sites.

Trends in the US
According to a report by Coopers and Lybrand, Internet ad spending for the first quarter of 1998 was up 271%, to $351.3 million, compared to last year's first quarter, and is due to break a billion dollars for the year. The computing category leads in advertising spending with 27% of the pie, and consumer-related advertising makes up 25%. Banner advertisements make up a majority of spending (with 55%) and sponsorships constitute another 40 percent.

Big money has finally arrived to the Internet and the deal-makers are raising the stakes and burning the midnight oil. Some examples: Barnes and Noble (the book chain) agreed to pay AOL $40 million to be the exclusive online bookstore on AOL for four years. CDNow (music site) paid MTV Networks $22 million for a three year package of online sponsorships, retailing, and advertising. Other commerce sites that are driving portal deals include: Amazon.com, N2K, Preview Travel, realtors.net, Cybershop, E-trade, Ticketmaster, and On-Sale.

All of this action has attracted traditional media and they are attempting to buy their way into the fray. In late Spring, NBC announced an equity investment in CNET, and in a separate deal, Disney purchased 43% of Infoseek (with an option to buy more). In addition, AT&T was rumored to have made an offer to buy AOL (although in the end nothing came of it). Expect to see more of these types of announcements this summer and fall. What the media companies are realizing is that it is often easier to buy the online portion of their media strategy rather than create it from scratch.

The top 5 sites in the US in May (for home users as reported by Media Metrix) were (in order from most popular) aol.com, yahoo.com, geocities.com, netscape.com, and microsoft.com.

Big in Japan?
Here is a quick rundown of what is happening in Japan: Internet advertising spending reached \60 billion in 1997 (according to Dentsu) and is on track to double in 1998. Yahoo Japan's site topped 10 million page views in one day, setting a new Japanese record. Yahoo is clearly the market leader in Japan. It is not only the busiest site but is also doing an excellent job turning its traffic into revenue. The big newspaper sites (Nikkei, Mainichi, Asahi) have been attracting a lot of traffic but are not true portal sites, as they display primarily their own content. Some may try to turn themselves into portals, but it would be a mistake to deviate from their focus.

Although Netscape generates more money from its Web site in the US than all of Yahoo's worldwide revenues, I don't think its portal success will translate in Japan. Currently, Netscape Japan lacks the people, the resources and the momentum to mount a viable effort here. Netscape's Japanese site will continue to generate high traffic but not high revenue.

Geocities recently announced a Japanese joint venture with Softbank. Partnering with Softbank is a surefire formula for success (Softbank is also Yahoo's biggest shareholder). Expect to see them in the top 10 within a year. Microsoft Japan [with whom this author is employed], just released a beta of their new portal, START, and is predicting a late fall launch of the final site. Shopping sites are the driving force behind a lot of the portal deals, and it turns out that AOL has a lot of these deals already sewn up. As the shopping sites start their Japanese operations (many like Amazon, E-trade, and N2K already have), it will be relatively easy for AOL Japan to leverage those deals here. AOL Japan is on its way to becoming a big player.

And finally, what you have all been waiting for: My prediction of the top 5 portal sites (ranked by viewership) in Japan 12 months from now: Yahoo, Microsoft, NTT Goo, Infoseek, Netscape / AOL.

A parting note: content providers should not feel pressured to turn themselves into portal sites. Content providers are wise to keep their focus and work on becoming the best in their category. It is, however, very important to partner with a portal site. Portals will be essential in driving traffic to your site and some of them are signing exclusive deals by category. If you wait too long you may miss out on the best partnerships. Partner with the one that best fits your user demographics and profile.

Forest Linton is IE Group Product Manager for Microsoft Japan. His views are his own and do not reflect the opinion of Microsoft. You can reach out and touch him at forest@gol.com.

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